- SEC greenlights options trading for BlackRock’s IBIT, enhancing liquidity and drawing institutional interest.
- Ethereum ETF options face a delay as the SEC postpones its decision.
- Analysts predict a potential gamma squeeze for Bitcoin funds, akin to the GameStop short squeeze.
- The Bitcoin derivatives market shows growth potential, though it remains significantly smaller than traditional markets.
Last week the US Securities and Exchange Commission (SEC) approved options trading for IBIT, the BlackRock spot Bitcoin exchange-traded fund (ETF). The approval is bullish as it allows improved liquidity and institutional involvement.
And Bloomberg senior ETF analyst Eric Balchunas believes more approvals will follow; however, Ethereum funds are not so lucky this time around, with the SEC just delaying a decision about ETH ETF options.
Related: Shots Fired: SEC Chief Gary Gensler Faces Tough Questions Over Crypto Enforcement Action
GME-Type Gamma Squeeze Incoming for Bitcoin Funds, Say Analysts
The Bitcoin ETFs meanwhile are riding a little wave of excitement with the options approval, which saw the price of BTC trend upward for the past week or so.
And while two regulatory bodies, the Options Clearing Corporation (OCC) and the Commodity Futures Trading Commission (CFTC), must still give their nod of approval, Bitwise Asset Management believes these funds could see a gamma squeeze.
A gamma squeeze happens when investors buy a lot of call options (which allow buying at a set price), predicting the market will rise. This forces market makers to buy the underlying asset to maintain balance, pushing the price up further.
The asset managers believe that with BlackRock’s IBIT and the approval of physically settled options tied to it, a gamma squeeze could occur if significant numbers of call options are purchased, forcing those selling the options to buy substantial amounts of Bitcoin to hedge their positions.
Related: China Opens Stimulus Flood Gates Amid Record Demand for Crypto OTC Trades
This could lead to rapid price movements in the Bitcoin market, as per Bitwise Asset Management’s head of research Europe, André Dragosch, who told CoinDesk:
The consequence of this would be a price spike similar to what we have seen with GME, which is akin to a “short squeeze” in futures.
André Dragosch, BitwiseSEC Delays Decision on Ethereum ETF Options Trading
As mentioned, Ethereum funds are not as lucky as Bitcoin ETFs, as the SEC just announced that it would need more time regarding options trading on Ethereum. In the filing the watchdog delayed a decision regarding the Spot Ethereum BlackRock and Bitwise funds until mid-November.
Derivative trading is a field with enormous growth potential. VanEck’s Matthew Sigel, head of digital assets research pointed toward a K33 report that shows the Bitcoin derivatives market is 279x smaller than the equity and commodity market.
And that’s not only the case for Bitcoin; the volume of Ethereum options is three times smaller than that of Bitcoin. It will be interesting to see if the SEC changes tune by November and what the market’s reaction will be.
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